Peter J. Henning, a law professor who formerly served as a senior attorney for the enforcement division of the SEC, suggested that the company could face even more pain – including possible backlash from securities regulators and its new auditing firm alike – as a result of its recent actions.

“The SEC is going to notice this,” said Henning, who worked as both a regulator and a prosecutor before assuming his current post as a law professor focused on white-collar crime at Wayne State University. “You can’t file a 10K without audited financials; that’s a precondition … I suspect that KPMG will want to know how this happened and, if they don’t get straight answers, they will be gone.

“It looks like somebody, somewhere, had to have lied,” concluded Henning, who writes a popular column for the “White-Collar Watch” section of The New York Times. “It’s hard not to draw any conclusion other than that this was basically fraud.”

For its part, Miller waited until the final hour of trading on Monday before it even began to publicly address the company’s bizarre actions. In an open letter to shareholders, Miller CEO Scott Boruff finally came forward to portray the recent 10K filing as an unfortunate accident. Specifically, he claimed that “a form of KPMG’s audit opinion” had been “inadvertently included” in the 10K (by unnamed parties) because the auditing firm had not actually released that report – and its consent to use it – to the company yet.

In short, critics note, Miller found itself operating under a powerful microscope – with even CNBC monitoring the once-obscure company – by the time that it finally released its overduereport. Miller’s four highest-ranking executives, as well as six outside directors, all signed off on that annual report the day before its release. After that, video footage shows, the CEO then personally assured CNBC that the company would file its audited 10K just hours before that long-awaited annual report finally appeared. The report included a so-called “comfort letter” from KPMG, dated on the same day as the 10K itself, which upheld the validity of those financial statements.

As outlined above, however, Miller would soon reveal (through both an 8Kand a letter from its chief) that the company never secured a formal blessing from its auditor before filing its annual report at all. As a result, Miller explained, the company has yet to file a “complete” annual report – which requires audited financial statements – and now fails to meet listing standards established by the NYSE for stocks that trade on that preeminent exchange.

With Miller already bracing for a warning letter from the NYSE as early as this week, critics say, the company could soon find itself scrambling – but potentially failing – to protect its coveted listing on the world’s leading stock exchange.

Even when Miller first issued its new financial statements, skeptics felt, the clean audit opinion from KPMG looked like nothing more than a pretty decoration on a rather ugly annual report.

For starters, that filing reveals, Miller already faces a crackdown by SEC regulators demanding omitted financial statements for three acquired companies – including a core Alaskan subsidiarythat reshaped its parent’s books – before they will approve the crucial paperwork necessary for additional stock sales. Miller claims that it was unable to supply the financial reports for its new Cook Inlet Energy (CIE) unit in Alaska, an addition that now accounts for the vast majority of the assets and revenues on its books, because the former owner of those assets failed to maintain proper records before filing for bankruptcy and abandoning its operations. Miller further states that it does not believe that it can obtain those audited financials, either, “which will adversely impact our ability to raise additional capital” unless the SEC – unbending so far – decides to change its mind and waive those mandatory reports.

As a result, Miller now looks entirely dependant upon a new $100 million credit facility to finance its big exploration plans. But Miller has failed to meet a key obligation set forth in that credit agreement, records indicate, which requires the company to supply audited financial statements no later than 75 days after its fiscal year ends (a deadline that passed in mid-July) in order to avoid a technical default. By tripping that covenant, recordssuggest, Miller could see its interest rate on that loan – already steep at a minimum of 9.5% -- jump to credit-card levels of 16.5% if the company retains ongoing access to those funds, rather than immediate demands for repayment, at all.

From the start, records indicate, Miller faced onerous restrictions whether the company remained in compliance with that credit agreement or not. Under the terms of that deal, records show, Miller must request any new funds from that account weeks in advance – while it waits, at the mercy of its lenders, for a decision – and then use 90% of its net revenue, starting in January, to begin paying off the money it has already borrowed along the way. Miller will see that entire loan mature in mid-2013, or less than two years from now, with the company apparently banking on a dramatic surge in revenue to cover the bill if it blows through the full $100 million by that time.

Miller initially secured permission to borrow $35 million from that account this June, records indicate, and has already spent at least $10.87 million of that money at this point. The company used a sizable chunk of that total to repay an earlier short-term loan from PlainsCapitalBank, secured with stock pledged by its CEO and his father-in-law (the founding chairman), that was scheduled to mature just a few weeks later. By paying off that loan in full, recordsindicate, Miller eliminated the brief risk taken by those two insiders when they pledged a portion of their massive stock holdings as security for a temporary credit line soon replaced by the current facility.

When the CEO issued his letter to anxious shareholders on Monday, however, he specifically emphasized that Miller insiders had “personally put themselves on the line” by guaranteeing that loan from PlainsCapital Bank without reminding investors that the company had since eliminated that same risk by paying offthe credit line.

Boruff then sought to further reassure investors by suggesting that senior management would soon begin increasing their stock holdings in the company as well. Notably, however, Boruff stopped short of stating that executives would buy their stock at market prices – sharing the same risks shouldered by ordinary shareholders – or simply exercise cheap stock options, many priced below 50 cents a share (including some, held by the CFO, set to expire next month) instead.

While Miller increased its annual revenue by $17 million last year, a 290% jump (from a modest base) that looks rather impressive on paper, the company also increased its annual expenses by an even higher $20.7 million during that same period. Miller posted total expenses of $37.9 million, more than double the expenses reported for the previous year, with the company spending more on overhead – particularly compensation for its well-paid insiders and outside consultants – than it spent on actually drilling for oil.

Miller spent $14.5 million last year on overhead, its new 10K filing shows, compared to just $9.7 million on drilling activities during that same period. The company recorded $5.16 million in stock-based compensation alone – a total that excludes the generous cash payments showered on its top executive – with that cost, totaling 12 cents a share, basically accounting for the entire net loss (also 12 cents a share) suffered by the company last year.

As CEO of the company, records show, Boruff received a compensation package valued at $2.1 million all by himself. He scored $1.425 million of that in cash – a sum approaching all of the unrestricted cash listed on the company’s most recent balance sheet – after securing a hefty bonus that more than tripled the cash payout that he would have otherwise received. He also owns more than 4 million shares of Miller stock, records show, a 10% stake in the company that’s still worth roughly $13.5 million even after the recent collapse.

* “We have a history of operating losses; we incurred a net loss in fiscal 2011 and our net income in fiscal 2010 was the result of one-time acquisition gains. Our revenues are not currently sufficient to fund our operating expenses and there are no assurances we will develop profitable operations.”

* “Approximately 75% of our total estimated proved reserves at April 30, 2011 were proved undeveloped reserves … The reserve data included in the reserve engineer reports assumes that substantial capital expenditures are required to develop such reserves.”

* “We will be subject to new debt costs under the terms of our Credit Facility … In January 2012, we will be required to devote 90% of our consolidated monthly net revenues toward paying back outstanding amounts.”

* “A large portion of our outstanding common shares are ‘restricted securities,’ and we have outstanding options, warrants and purchase rights to purchase approximately 35% of our currently outstanding stock … In the event of the exercise of the warrants and options, the number of (shares) of our outstanding stock will increase by approximately 34%, which will have a dilutive effect on our existing shareholders.”

* “Our management concluded that the internal control over financial reporting was not effective at April 30, 2011 as a result of material weaknesses in our internal control over financial reporting. These material weaknesses in internal controls have led to the restatement of our financial statements for the quarterly periods ended July 30, 2010, October 31, 2010 and January 31, 2011 … Due to the nature of these material weaknesses in our internal control over financial reporting, there is more than a remote likelihood that misstatements which could be material to our annual or interim financial statements could occur and would not be prevented or detected.”

* “The restatement of our historical financial statements has already consumed, and may continue to consume, a significant amount of our time and resources and may have a material adverse effect on our business and stock price … Many companies that have been required to restate their historical financial results have experienced a decline in stock price and stockholder lawsuits related hereto.”

* Important Disclosure: TheStreetSweeper currently holds no financial position in the stock of Miller Energy Resources. As previously disclosed, TheStreetSweeper established a short position in the stock before publishing its original investigative report on the company. However, it has already covered that entire position and has executed no additional trades in the securities since that time.

As a matter of policy, TheStreetSweeper prohibits members of its editorial staff from taking financial positions in the companies they cover. To contact Melissa Davis, the editor of this website and the author of this story, please send an email to editor@thestreetsweeper.org.